Chapter 11 Trustee Appointment Order

Summary

This Chapter 11 trustee appointment order is for use by a party that is filing a motion to appoint a Chapter 11 trustee in a Chapter 11 bankruptcy case. This template includes practical guidance and drafting notes. If the facts and circumstances strongly indicate that management must be divested of control altogether, Section 1104 of the Bankruptcy Code empowers the court to appoint a trustee upon request of a party in interest or the U.S. trustee after notice and a hearing. The statute provides that a trustee may be appointed (1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement, or (2) if such appointment is in the interest of creditors, any equity security holders, and other interests of the estate. Parties should note that the court has considerable discretion to appoint a trustee and that a determination of cause rests within the court's discretion as well. Once appointed, the trustee operates in a fiduciary role in its management of the estate, owing duties of loyalty and care to the estate and all of the interested parties in the case. The most significant effects of a Chapter 11 trustee appointment are that the Chapter 11 trustee completely displaces the debtor in possession from control over business operations and terminates the debtor's plan exclusivity. Among other things, the Bankruptcy Code requires the trustee to investigate the acts and conduct of the debtor and the continued viability of the business, to provide a statement of the investigation to the court and the committees, and to either file a plan or file a report as to why the Chapter 11 trustee will not file a plan. For a full listing of key content that provides an overview of important topics when litigating disputes in bankruptcy cases, see Bankruptcy Litigation Resource Kit. For information on Chapter 11 trustees, see Chapter 11 Trustees and Chapter 11 Trustees versus Chapter 11 Examiners. For a template motion, see Motion to Appoint a Chapter 11 Trustee.